21st Century Fox posted a gain of 44 cents per share for its fiscal second quarter ended Dec. 31, 2015, meeting Wall Street consensus despite missing the mark slightly on total revenue. On the television side, improved ratings and non-political advertising revenue were plusses, offset by increased sports rights fees and dormancy in the political category.
At an earnings call Monday afternoon, John Nallen, senior EVP-CFO, put the television division under the magnifying glass. He noted that revenue picked up by a factor of 6%, rising from $1.623 billion to $1.716 billion; but direction shifted downward when it came to OIBDA, which fell from $290 million to $279 million.
Increased advertising revenue and retransmission consent income helped to drive revenue gains, but were held back by the lack of political and a short Major League Baseball World Series. Punching the hole in OIBDA were increased rights fees for sports programming.
CEO James Murdoch added that the company’s TV stations posted a 3%-4% gain in revenue during the quarter when factoring out political.
Cable revenue rose from $3.384 billion to $3.703 billion, and OIBDA increased from $1.159 billion to $1.25 billion.
Overall revenues were down due to the loss of income from its former DBS business and other eliminations.
On an adjusted basis, total revenue fell 1% from $7.424 billion to $7.375 billion, primarily due to losses in the film division; however, the company posted a healthy gain in the OIBDA column, with a 2% gain from $1.695 billion to $1.73 billion.
Lachlan K. Murdoch, executive chairman, said that its Filmed Entertainment segment and foreign exchange rates put up headwinds for the company. He added that developing brands for viewers is a key part of the company’s strategy, and it is continuing to grow viewership despite increasing competition.
James Murdoch noted that the company fell short of its own targets during the quarter, but added that if it was worried solely about hitting short-term goals, it could cut its investments in new programming. That, he said, is something it is not going to do.
Murdoch is bullish on the several of the company’s new television series, which he says will be income generators for years to come. In total, the company’s television production unit currently has 36 active titles.
Hulu is adding opportunities for viewers and advertisers, noted Murdoch, and is expected to be an important distributor of Fox programming going forward. But it will not distract the company from continuing to serve MVPDs, OTTs and other distributors. It’s all about providing more ways for viewers to discover programming and for advertisers to reap the benefits of reaching those viewers.
Asked about the company’s relationship with MVPDs and the impact of cord-cutting, Murdoch was not concerned about suffering any significant damage. Despite the fact that the expanded basic cable universe is clearly contracting, Murdoch said it was continuing to do well. “We have pretty good visibility on reasonable growth going forward,” he said.
Murdoch said he is very happy about the company’s relationship with the NFL into the next decade, and is coming off its second-best season ever.
Fox has been focusing on simplifying its business over the past few years, said Murdoch in response to a question about any consolidation plans. As such, it is not particularly interested in acquisitions purely for the sake of growth. It will, however, make a move if the right property comes on the market.
Discussing investing in technology with an eye to competing with Netflix, Murdoch said Fox invests constantly to deliver a better product. And that goes for platforms that will allow it to distribute directly to customers. He still believes the competition will be on the creative side, and he’s is confident of Fox’s ability to compete well in that arena.
If 21st Century Fox has any plans to buy or sell stations, or to put stations up for auction as the FCC repurposes television spectrum for use in delivering wireless broadband, they were not discussed during this forum.
Michael Castengera
But they’re still going to cut costs. http://deadline.com/2016/02/fox-plans-personnel-cuts-corporate-wide-250-million-1201694342/
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